Eligible for a Health Savings Account?
To make or receive contributions to an Health Savings Account (HSA), the IRS specifies you must meet all of the following requirements:
- You’re enrolled in or will enroll in a high deductible health plan like K-C’s Consumer Driven Health Plan (CDHP) Blue with HSA or CDHP Green with HSA,
- You’re not enrolled in a separate non-high deductible health plan such a spouse’s HMO or PPO,
- You’re not enrolled in Medicare, Medicaid, or TRICARE,
- You haven’t received benefits from the VA for the last three months,*
- You can’t be claimed as a dependent on another person’s federal tax return, and
- You or your spouse, if married, can't have received or made contributions to a General Use Flexible Spending Account within the calendar year in which you want to make or receive HSA contributions.
If you don’t meet all of the requirements listed above – meaning you’re not eligible for an HSA – you’ll be given an opportunity to designate your HSA ineligibility for the upcoming year during enrollment. You’ll then be offered a CDHP with a Health Reimbursement Account (HRA) that meets IRS regulations.
Medical Veterans Affairs Benefits
The IRS applies a restriction on making or receiving HSA contributions if you receive medical Veterans Affairs (VA) benefits (excluding care for a service-connected disability or preventive care) for the three months prior to an HSA contribution.
Example:
If you have surgery at the VA hospital in June (excluding care for a service-connected disability), you’re ineligible to make or receive HSA contributions for the three months prior to your surgery (March, April, and May). To avoid a tax penalty, you must follow the HSA correction process and withdraw any contributions made to your HSA account while ineligible.
However, if you’re eligible for medical VA benefits, but you’ve not actually received services (or only received services for a service-connected disability or preventive care) in the three months prior to making or receiving an HSA contribution, you're considered HSA eligible and those contributions are yours to keep without tax penalty.
If the IRS restriction on VA medical benefits impacts your ability to make or receive HSA contributions, you still have the option to enroll in the CDHP Blue or CDHP Green with HSA. However, it’ll require you to manage your contributions during any period you’re ineligible by contacting Empyrean through the K-C Benefits Information Line or by logging on to kcbenefitcompass.com to stop and start your contributions in compliance with IRS guidelines. If you don’t want to manage your contributions during ineligible periods, you may want to consider the CDHP with HRA. Find more details about the CDHP with HRA below.
Social Security Retirement Benefits
When you sign up for Social Security retirement benefits, your Medicare Part A coverage automatically begins. If you’re over age 65 when you sign up, the Part A coverage will go back retroactively, up to six months.
To avoid a tax penalty, you should stop contributing to your HSA a) six months before you plan to apply for Medicare or Social Security retirement benefits or b) at age 65, whichever is later. However, you're not required to enroll in Medicare at age 65 if you're still working. Otherwise you may be able to avoid the penalty by making a timely contribution correction (see below for HSA contribution correction process).
CDHP with HRA
If you’re ineligible to contribute to the HSA, you’re eligible to enroll in the CDHP with HRA during enrollment. The way the CDHP with HRA works is similar to the CDHP Blue with HSA. The two main differences are:
Where K-C's Contribution Goes: K C puts money into an HRA rather than an HSA, but in the same amounts — $700 for Individual or $1,400 for 2-Party and 2-Party Plus coverage.
Making Paycheck Contributions: You can't contribute to the HRA.
Note that the comparison chart below describes coverage for in-network services only. A separate deductible, out-of-pocket maximum, and coinsurance apply to out-of-network services.
| CDHP with HRA | |
|---|---|
| Your 2022 annual medical paycheck costs (before Tobacco-Free discount) |
$564 Individual $2,310 2-Party $4,072 2-Party Plus |
| Deductible | In-Network: Out-of-Network: $1,500 Individual $3,000 Individual $3,000 2-Party $6,000 2-Party $3,000 2-Party Plus $6,000 2-Party Plus |
| Out-of-pocket maximum | In-Network: Out-of-Network: $3,000 Individual $6,000 Individual $6,000 2-Party $12,000 Individual $6,000 2-Party Plus $12,000 Individual |
| K-C’s HRA contribution | $700 Individual $1,400 2-Party $1,400 2-Party Plus |
| Preventive care | In-Network: K-C pays 100%.
Out-of-Network: You pay 100% until you reach the out-of-network deductible, then K-C pays 60%. |
| Coinsurance |
In-Network: You pay 100% until you meet the in-network deductible, then K-C pays 80%.
Out-of-Network: You pay 100% until you meet the out-of-network deductible, then K-C pays 60%. |
| Office visits | |
| Urgent care | |
| Emergency room | |
| Hospitalization | |
| Lab, X-ray, imaging | |
| Mental health inpatient | |
| Mental health outpatient | |
| Physical (includes chiropractic), speech, and occupational therapy |
In-Network: You pay 100% until you meet the in-network deductible, then K-C pays 80% (combined 60-visit annual max). Out-of-Network: You pay 100% until you meet the out-of-network deductible, then K-C pays 80% (combined 60-visit annual max). |
| Prescription drugs | |
| Maintenance | K-C pays 100% for certain maintenance prescriptions. 1 |
| Generic | You pay 100% until you meet the deductible, then K-C pays 80%. |
| Preferred brand | |
| Non-preferred brand |
1. To learn which maintenance prescriptions are included, log in at caremark.com or call CVS/caremark.
HSA Contribution Correction Process
If you determine there were contributions made to your HSA while you were ineligible based on IRS regulations, you can submit a correction form to Optum Financial, the financial institution that holds your HSA funds. The correction form involves withdrawing the total amount of any employee and employer HSA contributions made within the coverage timeframe for which you were ineligible.
Log in to secure.optumfinancial.com to access the form. Go to Tools & Resources, and select Excess Contribution Removal Form. Once you’ve submitted the form, Optum Financial will process your withdrawal and you’ll receive a check. The correction will also be reported as additional income to the IRS. If you have questions about the HSA contribution correction process, call Optum Financial.
Important Note: It’s recommended you contact your tax advisor for guidance before submitting the withdrawal form to Optum Financial.